USD/JPY reverses Wednesday’s up-move, slammed to 100-DMA

The USD/JPY pair extended its reversal from multi-week highs and has now dropped to 100-day SMA support, erasing all of its gains recorded in the previous session.

Currently trading around 103.40-35 region, dismal Chinese trade data released on Wednesday spooked investor confidence on renewed concerns of China-led global economic slowdown and triggered a sharp sell-off in the US equity markets, leading to an abrupt end to the major's recent appreciating move to the highest level since July 29.

Disappointing Chinese economic data led to the pair's initial leg of corrective move amid safe-haven demand for the Japanese Yen. Adding to this, possibilities of traders taking profit off the table, following the pair's recent leg of up-move from the vicinity of 100.00 psychological mark, could have further contributed to the pair's sharp slide on Thursday. 

The pair even failed to gain any respite from a drop in US weekly jobless claims to over 4-decade lows, which continues to reflect the underlying strength in the US labor market and raises prospects of an eventual Fed rate-hike decision by the end of 2016.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, notes, "Technically, the pair is poised to extend its decline, as in the 1 hour chart, technical indicators have turned sharply lower within bearish territory, while the price is aiming to extend below a horizontal 100 SMA. In the 4 hours chart, technical indicators also entered bearish territory, although the 100 and 200 SMAs head modestly higher far below the current level, indicating that the downward move is far from affecting the latest bullish strength. The line in the sand is 102.60, the 100 DMA, as it will take a break below it to see the pair regaining the bearish momentum seen last September."

"Support levels: 103.30 103.00 102.60
Resistance levels: 103.95 104.30 104.70"